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Chime Communications (UK)

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Chime Communications was for many years best-known as the holding company for the UK's biggest public relations agency, Bell Pottinger, as well as other advertising and marketing subsidiaries. It was founded and led by Lord Tim Bell, the PR guru who moulded the media image of the Conservative Party for much of Margaret Thatcher's political reign during the 1980s. However, in summer 2012, Bell and longtime business partner Piers Pottinger stepped down from the group, buying out the Bell Pottinger agency and establishing it as a separate company under private ownership. The slimmed-down Chime still has interests in PR, but is more specifically focused on advertising - through creative agency VCCP - and especially sports sponsorship, in which its CSM Sport & Entertainment subsidiary is the local market leader in the UK. The group was taken private towards the end of 2015 by private equity fund Providence, with backing from WPP.

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Brands & Activities

Chime underwent a complete makeover in 2012 following the sale of Bell Pottinger. In particular, the dominance of PR as its main business was greatly reduced, leading to a slightly more balanced profile. However, the group is now an even smaller fish in a big pond. A deal with another marketing services company, either a merger or an outright sale, may ultimately still prove the best match for Chime. The group already has a close relationship with WPP, previously its biggest individual shareholder. In 2016, WPP gave its blessing to the private buyout of the then-publicly quoted Chime by investment fund Providence. The latter has just over 72% of equity; WPP still owns the remaining 28%.

Chime's Advertising & Marketing Services division has undergone several restructurings in recent years, with its various units merged and combined several times under a variety of different management teams. Following Chime's acquisition of highly regarded creative agency VCCP in 2005 (for around £30m in cash and shares), most of the remaining marketing services units within Chime were folded into newly created VCCP Partnership, under the control of VCCP's management team.

Financial and professional services agency Teamspirit operates separately from VCCP, but under the same divisional heading. Advertising & Marketing Services was the single biggest division within Chime in 2014, contributing operating income of £86.8m, and operating profit of £12.4m.

Following the sale of Bell Pottinger, public relations is now the smallest of Chime's three main businesses. The group's remaining PR interests are now consolidated under the umbrella of Good Relations, the PR agency which formed the original core of the group. It continues to offer a similar range of services to Bell Pottinger, including healthcare, corporate, consumer and political communications. Other units specialise in a particular field. Harvard Public Relations, acquired in 2000, operates primarily on behalf of science and technology clients. The Holmes Report ranked Good Relations just inside the top 50 PR agencies worldwide with estimated fee income of $33bn in 2013. It appears to have reduced considerably in size since then. It reported revenues of just £8.6m for 2015. Since 2014 the business has been incorporated into the group's CSM Sport & Entertainment division.

Sports marketing was established as a separate unit within Chime for the first time in 2009, following the acquisition of a new unit, Essentially, and is the group's fastest growing business. The key unit here currently is Fast Track, the UK's leading sports marketing agency, acquired by Chime in 2007. That business was strengthened in 2010 with the acquisition of smaller rival Pmplegacy, followed by ICON in 2011. CSM is now the UK's biggest sports marketing agency. Essentially is the #2. However, perhaps the most significant development was an agreement to acquire Complete Leisure Group, the personal vehicle of Lord Sebastian Coe, outgoing chairman of the 2012 London Olympics, for up to £12m. In 2013, the group agreed to acquire US motorsports marketer JMI for a price of up to $71m, depending on future performance. Boosted by the Winter Olympics and FIFA World Cup, operating income from this division jumped 28% in 2014 to £81.2m, with operating profit of £13.5m.

Healthcare is another growing division within the group, focused around medical communications consultancy OPEN Health. Combined income was almost £22m. A fifth division specialises in research, now under the umbrella name Chime Insight & Engagement, or CIE. Its main units are Opinion Leader Research, offering general and niche audience market research; and Ledbury, which specialises in the luxury goods industry. It acquired field research business Facts International in 2007, and data analytics company Tree in 2009. It added another £9m of income.

As well as its 25% stake in Bell Pottinger, Chime retains minority holdings in BMT, originally a sales promotion agency known as Gasoline but which has gradually refocused on public relations; and also in Rare, a corporate design agency

Financials

Reported revenues for 2013 for the slimmed-down group were £299m, down 13% on the previous year, which included a part-year contribution from Bell Pottinger. However operating income rose 6% to £170.1m. The group reported a pretax loss of £4.7m, compared to a profit of £2.5m the year before. That figure included various exceptional charges. Chime claimed a headline pretax profit on continuing operations of £18.5m, slightly up on the year before.

For 2014, gross revenues rose sharply to £390.4m, and operating income jumped 18% to £200.2m. That resulted in much improved pretax profits of £15.8m. Headline pretax profits excluding amortisation were over £30m.

Annual figures for 2015 were not published because of the mid-year buyout of the business by Providence. Total purchase price was around £370m, the largest share of which was funded mainly by bank borrowings in Chime's own name. As a result, it had bank debt of almost £218m at the end of 2015.

The restructured Chime Group reported significantly increased revenues of £490m for 2016. Headline net profit excluding extraordinary charges was £14.3m. However, statutory results including impairments and more than £16m of finance costs associated with the buyout came in at a loss of £16m. The group has debt of almost £250m, mostly in the form of bank loans.

Background

Like WPP's Martin Sorrell, Tim Bell cut his teeth with Saatchi & Saatchi during the 1970s and 1980s. A founder member of that agency, he had risen to the position of international chairman by 1981. Closely associated with the public relations side of the business, he masterminded Margaret Thatcher's election campaigns in both 1979 and 1983. Yet Saatchi's headlong plunge into the US market didn't appeal to Bell and, increasingly sidelined by the Saatchi brothers, he jumped ship in 1985 to become group chief executive of newly floated Lowe Howard-Spink. A year later, Bell engineered the acquisition by LHS of PR agency Good Relations.

This was at the time the country's biggest PR agency, and its founder Tony Good is often regarded as the father figure of public relations in the UK. Previously the communications officer for Silver Wing Airways, one of the UK's first commercial airlines, Good set up his own company in 1961. It was one of the first public relations companies in the UK to specialise in the developing area of corporate communications, and expanded steadily over the next two decades. In 1981, it was also the first British PR company to go public, but encountered serious difficulties mid-decade, including the abrupt resignation of several leading staff to set up a rival firm. As its share price plunged, the company became the target for a number of corporate predators, but it was effectively saved by the offer from Tim Bell, a close friend of Tony Good. The business became the core of a new core of a new PR division within Lowe Howard-Spink, under the name Lowe Bell Communications. In 1989, Bell moved on again, buying out that entire business to become an independent company. Lowe Howard-Spink retained a minority shareholding.

For the next few years the newly independent Lowe Bell focused on its PR business, expanding through a series of small acquisitions. In 1994, the company floated through a reverse takeover of shell Chartwell Group, subsequently renamed Chime Communications. But within a few years, the group's public shareholders began to force the business towards a further expansion of its operations. In 1997, the group's license to use the Lowe name expired, and Lowe Bell metamorphosed into Bell Pottinger, with Good Relations managing director Piers Pottinger elevated to full partner.

Also that year the group acquired highly regarded advertising agency HHCL. To fund that deal, Chime sold 30% of its equity to WPP. The group went on to add AMD, a marketing consultancy for the property industry, at a cost of around £5m. In a single year, Chime had doubled its size, while also taking a position in the mainstream of advertising and marketing services.

The next few years remained comparatively low-key, although Chime continued to add a number of small businesses to its portfolio. The shopping spree picked up considerably in 2000, a year in which Chime acquired PR businesses Harvard, Insight and the Quentin Bell Organisation, as well as contract publisher Brass Tacks and advertising agency Roose & Partners. Total spend for the year on acquisitions was well over £40m. Another set of purchases followed in 2001.

But in 2002, the sudden economic slowdown hit marketing spending hard. Among Chime's worst hit businesses was ad agency HHCL, which lost a number of major accounts. As a result, the group began drawn-out negotiations with WPP to transfer that agency into the marketing giant's Red Cell network. A deal was finally agreed early in 2003, with WPP acquiring management control of HHCL for around £3.5m. In the meantime, the group's three separate media services agencies, AMD Media, First Financial and Osbourne Jack, were merged to form Pure Media. New divisional chairman Sue Farr over-hauled the rest of Chime's ailing marketing services division in 2003. Traditional creative agency Roose and its spin-off The Will Pond-Jones Collective were merged into integrated agency Heresy; while Rare Publishing was formed from the merger of group-owned digital agency AMD Online, customer publisher Brass Tacks and design agency Rare Corporate Design.

In 2004 Chime held merger talks with larger rival Incepta, owner of the Citigate brand, but these were concluded without agreement. Incepta was subsequently acquired by Huntsworth. In 2005, Chime stepped back into the advertising sector with the acquisition of VCCP, but subsequently sold off its remaining shares in HHCL to WPP.

Last full revision 2nd January 2017

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